Global Indemnity Group, LLC Class A Common Stock 2026 Q2 Earnings Call

Today's conference call is being recorded. GBLI's remarks may contain forward-looking statements. Some of the forward-looking statements can be identified by the use of forward-looking words, including, without limitation, believes, expectations, or estimates. We caution you that such forward-looking statements should not be regarded as a representation by us that the future plans, estimates, or expectations contemplated by us will in fact be achieved. Please refer to our annual report on Form 10-K and our other filings with the SEC for descriptions of the business environment in which we operate and the important factors that may materially affect our results. Global Indemnity Group, LLC is not under any obligation and expressly disclaims any such obligation to update or alter its forward-looking statements, whether as a result of new information, future events, or otherwise.

It is now my pleasure to turn the call over to Mr. Jay Brown, Chief Executive of Global Indemnity.

Thank you, Evan. Good morning, and thanks for joining us for GBLI's second quarter 2026 results conference call. Joining me today are Evan Kaczewicz, our Chief Operating Officer of GBLI and President of Belmont Holdings, and Brian Riley, our Chief Financial Officer. As usual, I'll start with a short overview of the quarter, including what stood out to me in the results and what we're seeing in our longer-term trends. Brian will then walk through the key financial highlights, after which we'll open the call for questions. Let me start with the headline. Our underlying insurance operating trends remain strong and consistent with the results we have delivered over the past several years. Our accident year combined ratio was 94.7 for the quarter, producing an underwriting income of $5.8 million. Through June, our accident year combined ratio was 94.8%, with underwriting income of $11.2 million, modestly ahead of last year.

Loss performance remains the strongest part of the story. Catastrophe experience was favorable, and non-catastrophe experience and results remained strong and consistent. Expenses remained well above our long-term target levels by approximately four and a half points as we continue investing in Katalyx, Kaleidoscope, and related technology platform capabilities. While these investments are elevating current expense levels, operating expense dollars have remained exactly in line with our 2026 plan. We will achieve significantly improved operating leverage as these initiatives drive efficiency, AI-assisted decision making, and support future growth. Turning to insurance revenue growth. Belmont Core gross written premium was $117 million for the quarter, up 7% year-over-year. Through the first half, Belmont Core gross written premium was $214 million, up 3% versus last year, still well below our rolling growth targets. Growth was led by Valiant Re, which was up 79%, and Collectibles, which was up 14%.

Penn-America also returned to growth, increasing 2% during the quarter after two consecutive quarters of declines, an encouraging result against a more competitive E&S market backdrop. The broader E&S market is becoming more competitive as admitted capacity expands and rate momentum moderates. We are extremely focused on not chasing volume at the expense of profitability. Instead, we are staying disciplined and leaning for growth into those areas of the portfolio, including Valiant Re, Collectibles, and our new venture pipeline that are less exposed to cyclical competitive pressures. Excellent future results are dependent on making sure this is an execution reality versus not just words. Within specialty products, legacy programs are also pressured by admitted carriers and MGAs. But we continue to see opportunity in the programs we want to retain and new programs expected to launch later this year.

Our retail and consumer-focused businesses continue to expand distribution with more than 700 retail agent appointments year to date. Collectibles grew 14% while continuing to deliver excellent underwriting results. And Vacant Express delivered 5% growth despite challenging property market conditions and are no longer offering a California admitted property product. Our new venture initiatives continue to advance, including aging services and specialty casualty. We have recruited very talented leaders for our team to establish these new offerings. Both will be important medium-term growth opportunities with product formation work progressing through the end of this year. Valiant Re remains on track for the year following strong growth in the first half. We continue to expand the portfolio thoughtfully, including the addition of new property quota share relationships while maintaining underwriting discipline and exiting underperforming treaties where appropriate.

Sayata is our digital distribution platform connecting agents and carriers in small commercial insurance and continued to make progress in the first half, with submissions increasing 8.5%, expanded carrier participation, and the launch of Excess Cyber. Just as importantly, operational efficiency continues to improve with automation initiatives reducing average daily tickets volume by more than 22%. These productivity gains, combined with enhancements to their leadership team, position the platform for improved operating leverage over time. On the technology front, the Penn-America Pro build is nearing launch, with testing substantially complete and deployment still targeted for a September go live. More broadly, the Kaleidoscope platform continues to be prepared to expand across our portfolio and remains a key driver of future scalability, efficiency, and robust partner connectivity.

The next phase of Kaleidoscope work will focus on Vacant Express and Collectibles with broader application to new ventures and partner API connectivity in 2027. This remains a significant near-term lift for the teams, but it is foundational to our operating model and future scalability. Stepping back, we continue to remain very confident in the underlying quality of our business. Loss ratio performance remains strong. Our portfolio continues to diversify, and we are navigating a more competitive E&S market with discipline. We continue to expect Belmont Core gross premium for the full year to finish approximately 15% above 2025 levels, while investment income should benefit from rising portfolio yields approaching 4.9% by year end. With that, I'll turn it over to Brian to walk through the key financial details.

Thank you, Jay. Net income was $11.1 million for the second quarter, up 8% compared to $10.3 million in 2025. For the year, net income is at $15.3 million, compared to $6.4 million in 2025. Starting with investments. Investment income for the second quarter was $16.4 million, compared to $14.7 million in 2025. For 2026, this includes income on a mark-to-market adjustment of $2.3 million on limited partnership interests. Excluding income of limited partnerships, investment income was $14.1 million in the second quarter, compared to $15.3 million in 2025, driven by a higher allocation of the fixed income portfolio to U.S. Treasuries. As for the first six months, net income was $28.6 million compared to $29.5 million in 2025. Excluding the impact of income related to limited partnerships, investment income was $28.3 million compared to $30.2 million, also driven by an increased allocation to U.S. Treasuries. The current book yield on the fixed income portfolio increased to 4.42% with an average duration of 1.08 years as of June 30, 2026, compared to 4.27% book yield and duration of 1.01 years as of December 31, 2025, resulting from reinvestment of $177 million of maturities at 5.45% that had an average yield of 4.26%.

As Jay noted, we expect this reinvestment trend to continue, targeting book yield of 4.9% by December 31, 2026. The average credit quality of the fixed income portfolio remains at AA-. Moving to underwriting income. For the second quarter, accident year underwriting income increased by 3% to $5.8 million, driven by 4% growth in earned premiums and a combined ratio of 94.7. Our loss ratio for the quarter remains strong at 53.8%. A 1.8 point improvement over 2025, driven by catastrophe loss ratio performance.

As Jay noted, the elevated expense ratio of 40.9% is driven by personnel costs related to build-out of products on the Katalyx platform. As for the year, and similar to the second quarter, accident year underwriting income increased by 3% to $11.2 million, driven by 4% growth in earned premiums and a combined ratio of 94.8. Note that that comparison excludes the impact of California wildfires from the 2025 figures. Turning to premiums. Belmont Core's gross written premiums increased 7% to $117 million for the second quarter, and 3% to $214 million for the year. At the divisional level, starting with wholesale commercial Penn-America business, Penn-America, which focuses on Main Street small business, was up 2% for the quarter, an improvement over first quarter, which was down 5%.

These trends continue to reflect maintaining pricing and return standards amidst the competitive market, as Jay mentioned, demonstrated by an overall flat rate change for the first half of the year and continued strong loss ratios. We continue to adjust our products to grow the business with the goal of maintaining our loss ratio. Valiant Re, our assumed reinsurance business is up 79% to $21.5 million for the second quarter, and 43% to $32.7 million for the first six months of 2026. As three new treaties were added during the quarter, the number of in-force treaties has increased to 22 at June 30, 2026. Vacant Express is up 6% to $13.1 million for the second quarter, and 5% to $24.5 million for the first six months of 2026. Collectibles is up 14% to $4.8 million for the second quarter, and 13% to $9.4 million for the year.

Last, specialty products did experience a decline of 36% to $7.8 million during the second quarter, and 21% to $15.5 million for the year, primarily driven by terminated products. Excluding the terminated business, gross written premiums on the 11 ongoing programs is only down 1%. In closing, I have five takeaways. One, we are on track to achieve growth of 15% in gross written premiums. Two, although we are seeing increased competition in the marketplace, we are optimistic about our future underwriting performance given the positioning of our current products and our loss ratio performance for the last three and a half accident years. Three, our investment portfolio remains positioned to invest in longer duration maturities at higher yields. Four, our book reserves remain solidly above our current actuarial indications.